Dr. Subodh K. Das

President & CEOSecat, Inc.

Aluminum Recycling – Challenges & Opportunities

Presented To:

Can Manufacturing Institute Aluminum AssociationAluminum Can Council

May 17, 2006Washington, DC

Items to be discussed

• Enhancing UBC Recycling– Sloan Center for a Sustainable Aluminum Industry– Fayette County Recycling Laboratory– Six Sigma Studies ( Published in Light Metal Age, June

2006– Economics of Recycling ( To be Published in Journal of

Metals or Aluminum Now ? )– Consumer Behavior Studies ( To be Published in

Aluminum Now ?)– Future Studies

• Emerging Trends in Aluminum Recycling

Center for a Sustainable Aluminum Industry (CSAI)

• Founded in Jan. 2005• Funded by several sources:

– Sloan Foundation Industry Centers Program– Arco Aluminum, Aleris International, Wise Alloys, Nichols

Aluminum, Logan Aluminum, Ormet, Hydro Aluminum, Century Aluminum

– The Commonwealth of Kentucky– The University of Kentucky

Sloan Industry Center-

Synergy of Partnership

Clark Distributing Co.

Recyclable CommoditiesWeight Shipped (lbs)

Price for April 2005 ($)Revenues Generated ($)

Composition by Weight of Total Commodities Shipped (%)

Composition of Total Revenue Generated (%)

Ratio of Revenues Generated to Weight

Shipped

Old Newspapers (ONP) 15,151,025 82.50 per ton 624,980 50.0% 36.68% 0.73

Old Corrugated Containers (OCC) 4,940,336 77.50 per ton 191,438 16.3% 11.23% 0.69

Mixed Plastic 240,400 0.04 per lb 9,616 0.8% 0.56% 0.71

High Density Polyethylene (HDPE) 461,800 0.29 per lb 133,922 1.5% 7.86% 5.16

Glass 3,238,982 4.80 per ton 7,774 10.7% 0.46% 0.04

Fiberboard 951,160 44.10 per ton 20,973 3.1% 1.23% 0.39

Aluminum Cans 579,252 0.63 per lb 364,929 1.9% 21.42% 11.20

Steel Cans 638,920 200.00 per ton 63,892 2.1% 3.75% 1.78

Sorted Office Papers (SOP) 2,101,710 105.00 per ton 110,340 6.9% 6.48% 0.93

Phone Books 588,600 49.70 per ton 14,627 1.9% 0.86% 0.44

PET-2 liters 659,480 0.20 per lb 131,896 2.2% 7.74% 3.56

Magazines 740,880 80.00 per ton 29,635 2.4% 1.74% 0.71

Source: James Carter, Manager LFUCG Recycling Center

06/01/04 to 06/30/05, 12 months

Commodities Shipped from LFUCG Recycling Center

Ratio of Revenues Generated to Weight for Commodities Shipped

From LFUCG Recycling Center (06/01/04 to 04/15/05)

Sorted Office Papers (SOP), 0.93

Phone Books, 0.44

Aluminum Cans, 11.20

Fiberboard, 0.39

Glass, 0.04

High Density Polyethylene (HDPE),

5.16

Mixed Plastic, 0.71

Old Corrugated Containers (OCC),

0.69Old New spapers (ONP), 0.73

Magazines, 0.71

PET-2 liters, 3.56

Steel Cans, 1.78

Beverage Can Recycling Update

• “Green” Proclamation – August 24– Mayor Isaacs, President Todd, Superintendent Silberman

• Calculating “True” Recycling Rate– Data available from recyclers (MRF, Wise, Baker)– Data available from distributors (AB)– Information needed from distributors (Coke, Pepsi, Coors, Miller)

• Collecting “Real” Data– Supermarkets– Waste Composition Analysis

• Six Sigma Methodology Initiated– Define Causes and Cures

• Find Ways to Measure and Implement Higher Recycling Rates• Strategies

Fayette County Program Update

Enhancing Aluminum Recycling in Fayette County:A Six Sigma Study

Dr. Subodh K. Das, President SECAT, Inc.Dr. Pradeep Deshpande, President Six Sigma & Advanced Controls, Inc.Margaret Hughes, Doctoral Candidate, Gatton College of Business and Economics, University of Kentucky

Why Six Sigma for Aluminum Recycling?

• Every “aluminum can” not recycled is considered a “defect”.

• Finding causes of these defects and recommending strategies to enhance recycling rate.

Six Sigma Application to Aluminum Recycling

Steps:

1. Find “true” recycling rate (first iteration - 39%).2. Draw process map to show recycling loop.3. Find “gaps” or areas of improvement in the recycling

loop.(i.e. Rosies delivered/vending

machines/businesses/apartments)4. Alter the process map to plug gaps.

Revised Process Map

Supplier

Retailer

DispensingMachines

Businesses Dormatories Houses

Rosie Delivered

Redeem forMoney

Trash Rosie

BakerWiseAlloys

Landfill MRF

Calls MRF

Yes

No

UniversityOf

Kentucky

RosiePicked Up

No

Recycling Bins\At Schools

Going Forward….

1. Implement Changes in Fayette County2. Replicate Warren County project3. Re-measure recycling rate to calculate

improvement4. Formulate plan for sustainability and

replicability5. Results will be published in August 2006 issue

of Journal of Metals

The Economics of Aluminum Recycling: A White Paper

Glenn Blomquist, ProfessorBrandon Koford, Research AssistantDepartment of EconomicsGatton College of Business and EconomicsUniversity of KentuckyCSAI Steering Committee PresentationJanuary 2006

Review Economics Literature – Large!

• Aluminum: U.S. and International Markets

• Solid Waste Disposal and Recycling

Pricing of Garbage

Deposit/Bottle Bills

• Curbside Recycling

• Municipal Recycling Facilities

• Determinants of Recycling

• International Experience

US Disposal Trends 1989-2002

0

10

20

30

40

50

60

70

80

90

1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002

MSW Landfilled (%) MSW Recycled (%) MSW Incinerated (%)

Why the Decline in Recycling?

• T.Kinnaman and D. Fullerton “The Economics of Residential Waste Management” (1999, 2000)

Curbside recycling factors:– Tipping fee higher, landfill savings– Population density greater, collection cost– Convenience and household’s time cost– Education, college degree– Membership in environmental group

Price of Recyclable Material – Factor?

• Price of recyclable materials falls → incentive to recycle is weaker

• REAL Price of used aluminum cans:– Price RELATIVE to prices of other things – US Bureau of Labor Statistics

• Real Price Index Value for Used Aluminum Cans = (Price Index Value for Used Aluminum Cans/CPI) (100)

Real Can Price & Aluminum Can Recycling Rate

0

0.2

0.4

0.6

0.8

1

1.2

1.4

1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004

Year

Rea

l Can

Pri

ce In

dex

0

10

20

30

40

50

60

70

80

Alu

min

um

Can

Rec

yclin

g R

ate

Real Can Price Aluminum Can Recycling Rate

Socially Optimal Recycling

• Average net benefit of curbside recycling for society as a whole is zero! (Aadland & Caplan, 2005)

• Recycling that leads to an 8% reduction of waste is best for society (Palmer, Sigman, and Walls,1997)

• Costs: $50 - $100 per ton more than landfill. Consumer time is a factor.

• Benefits: less of - litter, raw material use, and garbage. Willingness to Pay surveys.

Next Steps

• Results to date will be published in August issue of Light Metal Age

• Funding will be awarded to collect new data for one of the following two proposals to be selected for future study

Proposal 1: Price and Time

• Part of study of recycling behavior and marketing (Lexington)

• Investigate the role of real price of used aluminum cans on recycling rate - statistical

• Redemption rate experiments – individual, group

• Convenience & time cost experiments

• Reverse vending machines experiments

Proposal 2: Ripe Cities

• Identify cities with (estimated) positive social net benefits of more recycling and target efforts

• Cost and Benefit information from Aadland and Caplan (2005)

• Adjust to Midwest, Southeast, and East

• Compare to current recycling rates

• Cities with positive net benefits and low recycling rates are ripe for more recycling

Understanding Recycling Behavior: Who Recycles and What Motivates Them

Dr. Fred Morgan and Margaret HughesSchool of ManagementUniversity of Kentucky

January 19, 2006

Older Larger incomes

Live in households with fewer members

More liberal in political orientation

Recyclers Relative To The U.S. Population:

So on balance, Kentuckians will be harder to motivate to recycle because they are younger, with less wealth, larger households, and more conservative politically

Research indicates that the benefits of recycling (and most voluntary programs) are easy to understand by nearly everyone if the facts are presented clearly

What people need is to feel “connected” to the reasons for recycling so that they will participate without dropping out

Explaining Recycling Behavior

- Theory of Planned Behavior

- Theory of Reasoned Action

- Residual Effect of Past on Recent Behavior

Taken together, these theories suggest that people act in ways that take into account:

• consequences of their behavior,• ways others are likely to view their behavior, • factors that help or hinder their behavior.

What These Theories Tell Us

• Behavioral Beliefs (How will I feel or what will happen to me if I act in a certain way?)

• Normative Beliefs (How will people I know expect me to behave and what will they think of me?)

• Control Beliefs (What events or results or people could hinder my acting in a certain way?)

These lead to behavioral intention.

Then to actions.

Perceived Consumer Benefits of Recycling from Empirical Research

• Environmental– saving natural resources – saving energy

• Economic– savings of using recycled aluminum – local jobs supported by recycling – community funds from recycling programs – Personal funds through compensation

• Personal– participation in environmentally helpful activities – sense of individual importance in a global program – being recognized by others as being responsible

Reasons for Acting

Intentions

Overt Signal of Intentions

Actions

Desire

Research Model to Be Tested

Future Research

• Investigate impact of economic benefit programs (ie couponing) on recycling for lower income households.

• Investigate education programs to translate planned behavior into action.

• Investigate effect of feedback processes.• Action steps: test programs – economic and educational cross-sectional interviews data collection

Emerging Trends in Aluminum Recycling –Reasons & Responses

Dr. Subodh K. Das, President & CEOSecat, Inc.

Presented to:TMS 2006San Antonio, TXMarch 15, 2006

Number of Primary Smelting Plants in the U.S.

0

5

10

15

20

25

30

35

1980 1990 2000 2003 2010

2003: Fourteen (14)

Smelters Operating

SMELTERS OPERATING - 2003

• 8 Alcoa

• 2 Century

• 1 Alcan

• 1 Norandal

• 1 Ormet

• 1 Columbia Falls

SOURCE: LIGHT METAL AGE

??

U.S. Trends Of Re-Melting vs. Smelting(000 Metric Tons)

02,0004,0006,0008,000

10,00012,00014,00016,00018,00020,000

1980 1990 2000 2010 (e) 2020 (e) 2030 (e)

RE-MELTING SMELTING

SOURCE: SECAT, INC.

Why Recycling?

The Aluminum Can Recycling Rate, 1992-2004

45

50

55

60

65

70

1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004

Year

%

National Aluminum Beverage Can Recycling Rate Trends.

1% change in recycling rate has an economic impact of approximately $12 million

Trashed cans contribute about $600 million to the nation’s

trade deficit each year

Impact of Recycled Automotive Aluminum

• Two largest areas are cans and autos• Can recovery reached ~67% in early 1990’s – now at

~50%; cultural, societal and technical issues• Auto metal recovery >90%; aided by regulations,

shredders and lack of individual choice.• Recovery of Al from autos has exceeded all other scrap

sources since 2005• We have to learn to make as much new aluminum

products as technically possible from recycled automotive aluminum in the US